# ESG Components Research

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## ESG Components Research

### Introduction

Below are detailed analyses exploring how carbon credits are calculated, research findings approving the hypothesis that it is possible to RENT trees and use that in a calculation for carbon offsets, details showing how planting trees is used in calculating carbon offsets, an overview detailing how the Waste Management Phoenix Open tournament became carbon neutral, and strategies currently being utilized to become water neutral.

### Processes Involved in Calculating Carbon Credits

• Calculating the carbon footprint requires accurate information on the sources and quantities of carbon emissions. Three levels are considered when calculating the carbon footprint, i.e., individual/home, office, and company calculations.
• For home and office calculations, energy consumption, travel, meals, and hotel stays are considered. However, for company calculations, the whole value chain of products and services is considered and includes factors like electricity usage, natural gas consumption, heating oil, propane, servers, company fleet, and employee travel and commute.
• Numerous calculations and formulas are used to convert greenhouse gas emission numbers into CO2 equivalent units. In this regard, different formulas are used for determining the CO2 emissions from electricity, gasoline, natural gas, oil burned, home energy use, etc.

### Formulas Used in Calculating Carbon Credits

Below are the common formulas used in calculating carbon emissions originating from electricity consumption, gasoline, and gallons of diesel consumed.

### Gallons of Gasoline Consumed Formula

• In the U.S., the EPA/Department of Transportation established a standard conversion factor of 8,887 grams of CO2 emissions per gallon of gasoline consumed for use in calculating gasoline CO2 emissions.
• The formula established assumed that all carbon in the gasoline burnt converts to CO2. The formula is outlined below
• 8,887 grams of CO2/gallon of gasoline = 8.887 x 10^-3 metric tons CO2/gallon of gasoline
• Implying that for every gallon of gasoline, there are approximately 8,887 grams of CO2.

### Gallons of Diesel Consumed

• The U.S. EPA/Department of Transportation also established to use a standard conversion factor of 10,180 grams of CO2 emissions per gallon of diesel consumed.
• Therefore, the calculation formula is as follows
• 10,180 grams of CO2/gallon of diesel = 10.180 x 10^-3 metric tons CO2/gallon of diesel

### Examples of Organizations Providing CO2 Emission Calculators

There are numerous organizations globally that offer tools and resources for calculating carbon emissions based on the type of source. Some have detailed formulas that factor in numerous aspects that contribute to emissions. Three such organizations are discussed below.

### 2. POSSIBILITY OF RENTING TREES FOR CARBON OFFSETS

While limited in the public domain, some evidence suggests that it is possible to rent trees to use in calculating carbon offsets. Further, the few reports in the public domain focus on broader view of renting land, rather than trees for carbon sequestration. Because land provides more value in offsetting carbon, i.e., below and above the soil. Therefore, the reports explored provide an overall view of the possibilities around rented land as a way to reduce CO2 emissions.
• A report by ECOS, which reports on sustainability for Australia’s national scientific research agency, CSIRO provides an in-depth review of the potential of renting carbon offsets than buying. It argues that renting carbon recognizes that “biological carbon sequestration is inherently uncertain, but has value” even if sequestered for a few years.
• According to the report, renting carbon allows farmers to trail carbon sequestration projects in the short-term, while benefiting from ongoing payments that reflect the value of their land to the atmosphere. Such arrangements could encourage increased farmer and landlord participation in other sustainability projects like biodiversity or improved water quality.
• For large scale rental projects, the carbon sequestration can achieve permanency characterized by entering and exiting participants until a steady flow of carbon sequestration projects is achieved. Therefore, carbon renting can promote sustainable and profitable land sector participation in CO2 markets.
• A study published by the Research Institute of the Finnish Economy, Finland, Helsinki concluded that forest economics literature uses two approaches to apply carbon payments to forest owners: a “carbon rental policy and a policy where carbon compensations are based on subsidies and taxes.” The report further reveals that the carbon rent policy can be easily implemented and integrated into a trading scheme. This report further illustrates the potential of renting forests or trees to offset carbon.
• In another report by the University of Illinois: Department of Agricultural and Consumer Economics, the issue of rented land is discussed and concludes that for rented land, farmers must confirm their right to sell carbon on the property to companies buying carbon credits. In this regard, the reports acknowledges that it is possible to sell carbon credits on rented land. Therefore, this example further approves the hypothesis that it is possible to rent trees to use in calculating carbon offsets.
• Companies such as Bayer, Nutrien, ESMC, Indigo, and Nori are investing in farmers to help reduce CO2 emissions. For instance, Indigo runs initiatives where farmers can earn \$15 per metric ton of CO2 sequestered. With a \$15 trillion dollar opportunity for farmers to help mitigate climate change, there is potential for renting land or even trees to help mitigate climate change.
• Overall, the research findings approve the hypothesis that it is possible to RENT trees and use that in a calculation for carbon offsets. The biggest challenge is that existing policies do not yet consider renting carbon offsets; however, the exploding carbon market has even greater potential to trigger such business models as more farmers become aware of their potential to reduce CO2 emissions.

### Natural Capital Exchange (NCX) Carbon Program

• Natural Capital Exchange (NCX) has a carbon program that allows forestland owner to “lease, the additional carbon accumulated through delaying a timber harvest for one year.”
• In 2019 Microsoft funded NCX to start a carbon credit program with 20 landowners in Pennsylvania. Presently, the program has over 670 landowners with 2.35 million acres. NCX has also sold an estimated 270,000 carbon credits.
• Companies that bought carbon credits include Microsoft, Rubicon, Patch, Lune and Cargill.

### City Forest Credits

• City Forest Credits is another organization with a program where forest owners sign a lease agreement for a minimum 40-year preservation commitment. Landowners and forest owners must commit to preserve the trees for 40 years to earn carbon credits.
• Bassetti Architects, City of Austin, Fishermen’s Finest, Microsoft, and PayPal are examples of organization taking part in the project.
• Unfortunately, City Forest Credits has not shared the program’s success metrics.

### 3. HOW PLANTING TREES IS USED IN CALCULATING CARBON OFFSETS

Planting trees helps to offset carbon emissions by absorbing carbon from the atmosphere and in exchange releasing oxygen. This biological mechanism is what conservationists believe can help lower carbon emissions by planting more trees to increase the current global forest cover.

### Step by step process about how planting trees influences carbon offsets calculations

• Trees have the ability to store carbon, thus, planting more trees compounds the carbon storing capacity of the trees' thus, as more trees are planted they result in more carbon being captured and stored than before.
• However, some types of trees have the potential to store more carbon than others. For example, deciduous trees generally have dense wood that enhances their ability to store more carbon than coniferous trees. Trees such as the Douglas Fir, Ponderosa Pine, Redwoods, London Plane, Teak, and Eucalyptus are good at absorbing CO2.
• Therefore, when planting it is imperative to balance the ecological integrity and carbon sequestration capability of the forest by selecting trees with better CO2 absorption capabilities.
• As forests mature, the capacity of trees to store more carbon increases. In this regard, it is vital to calculate the growth of the tree and its carbon storage potential over time to accurately demonstrate the total carbon the forest has sequestered over a given period.
• The image above shows examples of daily life carbon emissions

### The Equivalent of One Tree in Offsetting the Carbon Footprint

• Searches in the public domain regarding the amount of carbon a tree can absorb lead to one answer that claim in one year, a fully mature tree absorbs about “22 kilograms of carbon dioxide from the atmosphere, and in exchange release oxygen.” Unfortunately, the assertion is not backed by a scientific study.
• According to One Tree Planted carbon emissions experts, tree growth influences carbon absorption and there are many factors that affect tree growth, including tree species, location, climatic conditions, sunlight, water, soil nutrients, and site specific factors, among others.
• One Tree Planted uses the Winrock International Forest Landscape Restoration (FLR) Carbon Storage Calculator based on 330 published studies and report. According to the calculator, planted forests and woodlots remove an estimated 4.5 to 40.7 tons of CO2 per hectare per year, while mangrove restoration removes about 23.1 t CO2/ha/year, natural regeneration 9.1–18.8 t CO2/ha/year, and agroforestry 0.8–15.6 t CO2/ha/year.
• Based on average planting densities per hectare (1,000 trees per ha), of land, the results show that the average tree absorbs about 10 kilograms (22 pounds) of CO2 per year for the first 20 years. Due to the varying figures one backed by research and one not, it is ideal to assume that on average, one mature tree has the potential to absorb from 10 – 22 kilograms of CO2 per year.

### Organizations that Have Planted Trees to Offset Carbon Emissions

• Amazon partnered with The Nature Conservancy (TNC) to establish a nature-based carbon removal project in the Brazilian Amazon Rainforest. The project, Agroforestry and Restoration Accelerator expects to support 3,000 small farmers in Pará state to help restore an area the size of Seattle by 2024 and remove up to 10 million metric tons of CO2 from the atmosphere by 2050.
• WeForest by Nike is also planting trees to offset the carbon emissions associated with shipping Nike products throughout Europe. The company is piloting a project the size of 375 soccer fields in Pontal do Paranapanema, Brazil. So far, Nike has planted over 600,000 trees, and when fully grown they will offset the equivalent of 10,200 Europeans.
• Other organizations actively involved in planting trees to offset the carbon footprint include 8 Billion Trees, The Nature Conservancy, Arbor Day Foundation, Trees for the Future, and American Forests.

### 4. HOW THE WASTE MANAGEMENT PHOENIX OPEN TOURNAMENT BECAME CARBON NEUTRAL

The Phoenix Open is hosted by the Thunderbirds and sponsored by Waste Management. It became GEO Certified in 2017 and received its fifth GEO Certified Tournament status for a fifth consecutive year in 2021.

### 5. STRATEGIES BEING UTILIZED CURRENTLY TO BECOME WATER NEUTRAL

Reduction efficiencies to make water usage efficient, offsetting initiatives, and reusing water through harvesting rainwater or recycling kitchen water are three examples of strategies being utilized to become water neutral.

### Offsetting Water

• Offsetting water is another major initiative companies are adopting to help become water neutral. Companies looking to offset water ought to carry out retrofits or find a partner to do them and find and fix leaks.
• Often, offsetting is done in partnerships involving organizations like a water company, the local council, businesses, or charity organizations. Some practices that are common in water offsetting projects include funding water efficiency audits and retrofits for existing buildings or businesses using water companies.
• Other practices entail donating/paying a fee to a real estate company to retrofit their units, identifying leaks and retrofitting school water infrastructure to promote water efficiency, and retrofitting water infrastructure in existing public buildings or schools.
• The image above shows PepsiCo water neutrality initiative's strategies.
• In 2021, PepsiCo announced an ambitious water offsetting/replenishing initiative that seeks to reduce absolute water use and offset over 100% water used at company-owned and third-party sites in high-water-risk areas to the local watershed. The company’s PepsiCo's holistic "Net Water Positive" vision wants to provide safe water access to an estimated 100 million individuals by 2030.

### Research Strategy

The research team leveraged reports and studies published by reputable sustainability businesses, including Eco Matcher, EPA, Plana Earth, Trees Organization, 8 Billion Trees, along with reputable news vendors like CNBC, among other reputable sources. The reports featured updated information to reflect the current state of carbon neutrality and water neutrality. Examples included are drawn from different parts of the world to show how companies globally are working towards carbon and water neutrality. Overall, the sources leveraged provide more recent data as carbon and water neutrality initiatives continue to gather momentum and traction in the sustainability market.

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